The woes of the UK high street are well publicised and much of the struggles of established bricks and mortar brands is put down to the rising share of retail being swept up by ecommerce. And it’s certainly not a trend which is restricted to the UK. Across the globe ecommerce is gradually increasing its share of total retail spending.

Source: invesp

But as a developed economy, digitalisation is further forward in the UK than in it currently is in many other parts of the world. Compared to the global 8.8% share of all retail that ecommerce captured in 2018, the total was around double in the UK.

Source: ONS/SaleCycle

And one ecommerce operation in particular bestrides the world of online retail – Amazon. In the USA, Amazon has an over 50% share of the entire ecommerce market. In the UK it is less at 31% but that is still a huge market share. So big that £4 of every £100 spent on retail in the UK is spent with Amazon. The only retailers, online or offline, that have a larger share of the UK’s retail spend are the big four supermarkets of Tesco, Sainsbury’s, Asda and Morrison’s. So if groceries are taken out of the equation, Amazon is by some distance the biggest retailer in the country.

Global retail e-commerce market share of Amazon from 2016 to 2019

That’s a status the ecommerce giant holds across North America, Western Europe and many other parts of the world. And Amazon is not resting on its laurels. Its moving into new areas of online retail, notably groceries but also sectors such as pharmaceuticals. But Amazon’s ambitions are not limited to online retail – its moving into the bricks and mortar world too. The Whole Foods chain was acquired in 2017 as a test bed for bricks and mortar operations generally and the groceries market more specifically.

Amazon Go, a chain of tech-enabled physical convenience stores that have almost no staff and track what shoppers have picked up, charging their card when they walk out of the door, followed in 2018. By early autumn 2019 that chain is now 19 stores strong and the plan is to increase that quickly. If and when Amazon is confident it has ironed out the creases in its business plan and operations, there is little doubt a full out assualt on the bricks and mortar groceries market will follow – and not only in the USA. Amazon Go’s entry into other large, developed markets like the UK can be expected to quickly follow. The company has a cash pile of over $40 billion that is building up quickly and ready to be put to work when Amazon feels ready to take on its next big expansion opportunity.

Source: macrotrends

Amazon’s success can’t be put down to just the growth of ecommerce as a general share of the overall retail market. The online behemoth has close to perfected the art of using technology to both give shoppers a better experience and then to keep selling them more…and more…and more. It plans to transfer that tech-centric template into the bricks and mortar retail world and seamlessly bridge the divide with ecommerce.

The Next Lesson

It should be no surprise that the traditional bricks and mortar high street names that are holding up best against the onslaught of Amazon and ecommerce more generally are also those that have done the best job of developing their own ecommerce offering. A perfect example is high street clothing giant Next. While rivals including Debenhams, New Look and Topshop are struggling for survival, Next has been revising its annual profit expectations upwards and saw full-price sales rise 4% over the quarter to the end of July. A drop of 0.5% had been expected.

But sales in Next stores did fall – by 4.2%. Full price sale for the year are, however, expected to rise by 3.6%. Next’s online sales, up 12%, are not only picking up the slack but leading to improvement in overall figures. Next is outperforming all of its mid-market price point bricks and mortar rivals and it is thanks to the clothing retailer’s online success and well-oiled ‘click and collect’ service which the bridges online and offline shopping experiences.

Progressive Bricks and Mortar Retailers ‘Tech-ing Up’ To Stay Relevant

Next is, of course, not the only example of a bricks and mortar retailer also doing well online and leveraging technology to improve the customer experience and general business efficiency. Let’s take a look at some other examples of how retailers are using technology to fight back against the dominance of Amazon and rising market share of ecommerce operators more generally.

Not Only Amazon Can Do Automated Stores

The tech stack that means shoppers can just walk into an Amazon Go store, pick up what they want, walk out and be charged – all without interacting with another human being – sounds like something it would need a real tech giant to pull off. But not necessarily. A number of start-ups have also started to pop up promising to offer any existing bricks and mortar store the technology needed to go check-out free – and not in the annoying ‘self-service scanner’ way.

One such company is US-based grabango and in the UK, Tesco is said to be working with another check-outless technology provider and hope to start introducing pilot schemes in the near future.

‘Digital Engagement’ Can Bridge Physical and Online Retail

Another example of how bricks and mortar retail can bridge the digital divide is an app produced by London-based Hero. Hero’s digital engagement app promises to help alleviate weaknesses of both physical and online retail. Bricks and mortar stores have quiet periods during which staff are often not necessarily particularly productive but are still being paid. It’s almost impossible to avoid these ‘down times’.

A weakness of online retail is that it lacks a personal touch. That’s less important when it comes to mid-range or cheaper products but can make a real difference to sales for higher priced luxury products. Hero’s app lets staff in bricks and mortar stores chat with online clients via a tablet when they are not busy in-store. So online sales can be made in a more personalised and consultative way at the same time as folding clothes or rearranging shelves in quiet periods. Luxury brands such as Harvey Nichols, LVMH and Nike are all already using Hero.

Another example of retail tech making a difference is San Francisco-based Faire. Fiare is a wholesale marketplace but uses data and AI algorithms to match particular retailers with the stock the data says will sell best. It also works with small, independent producers and bills itself as a wholesale equivalent to Etsy.

Another is b8ta – founded by four former Nest Labs employees. B8ta focuses on the ‘experiental nature’ of retail – emphasising a touch-and-feel, playground-like experience unavailable on a website. Its stores, of which there are now 17 in the USA, stock electronics gadgets normally not available in physical stores and allow shoppers to play around with them. It’s moving into kids toys as well and will revive the Toys R Us brand.

But despite the ‘touch and feel’ focus of b8ta, it is very much integrated with tech. In-store cameras even track shoppers, replicating in the analogue environment how “cookies” learn from online shoppers, allowing staff to offer more targeted offers based on displayed interests.

Bricks and mortar retailers are waking up to the fact that they do have considerable advantages over online retail. If that wasn’t the case, why would Amazon be so keen on moving into bricks and mortar? As Hero co-founder Adam Levene has commented:

“Amazon is great for buying, but it’s terrible for shopping”.

As long as physical retailers understand that and take steps to leverage both the latest technology and create bridges to the digital retail space, there is no reason why they can’t thrive as Next has done. And it certainly doesn’t have to be a one-way street of Amazon moving offline to challenge bricks and mortar retail. There’s no reason why bricks and mortar retail can’t start to up their challenge to Amazon in the digital space.